Spruce Things Up

The sizzle has sold more steaks than the cow ever has, although the cow is, of course, mighty important.

– Elmer Wheeler

A few years ago, B2B Exit®, a division of B2BCFO® surveyed business owners who were considering selling their businesses. Of those surveyed, nearly half (49%) listed the valuation of their business as their greatest concern when they considered a business sale. That concern makes a lot of sense and wise business owners will consider the way buyers will value their businesses. With an estimated 12 million privately held businesses in the US owned by baby boomers, this topic has gained a lot of traction. A Google search of “improve small business value” yields 1.7 million postings. I’ve looked over many of these articles and they offer a lot of good advice but most of the advice concerns activities that take time to properly put into effect. Business owners will need to deal with these issues in order to sell, but I find that creating early successes will help to build momentum toward a successful conclusion. Before I get to my suggestions, let’s have a short discussion on how deals get done.

The Numbers and the Story

Every successful business offering has two components, the numbers and the story. The numbers include your financial results over time. They show a buyer your profit and growth to date. In most deals the numbers, particularly profit, will set the baseline for the pricing calculation. Buyers then will determine how much to offer for the business based on a multiple of the baseline profit. On a general level a business’s story will drive the multiple. In Mr. Wheeler’s quote above, the numbers are the steak, the story provides the sizzle. Most of the articles I found in my Google search deal with ways to improve a business’s numbers. In the short term a business can’t do much to improve its numbers. But I have three suggestions of things an owner can do in the next 60-90 days that will help a business to improve in ways that will make it more enticing to potential buyers.

Spruce Up Your Story

What actually is the story? Potential buyers want to understand the reasons why they might want to purchase your company. Your story provides that information. A business’s story explains the company’s unique value proposition, the vibrancy and growth potential of your market, the special capabilities that your business offers its customers and the competitive environment and why your business thrives in it. Most business owners know these things on some level but have not organized this information into a cogent whole. A good story deals with the following issues:

Your company’s history. How did it come to be successful?

A description of your company’s products or services and why they succeed in the marketplace.

A discussion of your company’s markets with an emphasis on growth potential and the competitive environment.

Unique characteristics of your business that drive superior value such as a strong management team, a unique production technology, a strong brand, an advantageous location, uniquely strong customer relationships or vendor relationships among many others.

Growth opportunities the company cannot currently pursue due to a lack of resources such as growth capital, access to markets, access to technology or access to certain professional expertise. Opportunities like these make the business enticing to a potential buyer who can provide the missing resource.

Once you have all of this information compiled, you need to organize it into a concise, cogent presentation. The knowledge you gain and the ability to discuss your business in a way the potential buyer can easily understand will help you greatly when it’s time to start the discussion. I do have one warning, this looks easy but it isn’t. Thinking about your business and then condensing your knowledge down to a level that an outsider can understand is hard work. But it’s worth it.

Spruce Up Your Look

When I say to spruce up your look, I’m not talking about an expensive makeover. I’m talking about tidying up your premises and your operations. I’m continuously amazed at how sloppy some owners have allowed their businesses to become, even in areas visible to customers and vendors. Buyers see sloppiness and devalue the business in their minds and also wonder if the sloppiness carries over to the business’s core activities. Your company’s physical look validates (or fails to validate) your story. Make sure your look is a good as your story. A bad look will make your sizzle, fizzle.

Sloppiness is a self-inflicted wound and you can improve the situation without spending much money or an inordinate amount of time. Here are some of the unnecessary turnoffs I see on a regular basis.

Dust or dirt in the corners and under furniture in customer waiting areas.

Four-year-old, dog-eared magazines in customer waiting areas.

Stained carpet and nicked walls in common areas.

Bankers boxes of old documents piled up along the walls in clerical areas. Usually the bottom layer has crushed corners and collapsing sides.

Exterior electric signs with letters out (see above). If you’re going to have that kind of signage, keep it maintained.

Demonstration materials or sales aids laying around from the last sales presentation. Put materials away when you’re done with them.

None of these issues require an expensive or difficult fix. They require some attention to detail and someone in the organization with the assignment to regularly deal with them. A carpet cleaning and a Saturday with a roller and a can of paint can do wonders as well. Buyers want to buy a company that “has it together” Make sure that your company looks like it “has it together” and that your look validates your story.

Spruce Up Your Online Presence

If the condition of your physical premises sends a message to buyers about how “together” your company is, your online presence might send an even stronger message. Your online presence includes your web site and any social media platforms your business uses for informational and/or promotional purposes. Again, I’m not talking about expensive upgrades, I’m talking about sloppiness and inattention. Some examples of the self-inflicted wounds I see on a regular basis:

Former employees’ bios listed on your “Our Staff” tab well after their termination.

A Facebook or Instagram presence that hasn’t had an update in months or in some cases years. Either update your social media sites regularly or take them down entirely. Inattention is deadly.

Old or out of date information displayed prominently. (Closed locations, wrong business hours, out of date phone numbers, etc.) Sometimes this error can be downright misleading. I have seen companies continue to display a vendor’s logo on their web-sites long after the company ceased to be an authorized agent for that vendor. Buyers will notice.

A blog or news section on your web site that hasn’t had an update in 4-6 months. Again, if you aren’t going to update these sections, eliminate them.

Buyers (and customers for that matter) use your online presence to validate your company and your story. Like your physical premises, your web presence needs to look like your company truly “has it together”.

The Final Takeaway

You have to be intentional about selling your business and these three steps provide a good starting point. But they are only a starting point. If you’re truly serious about exploring a sale here are two additional things you should do:

Commit to the sale process. At times, it will seem like selling your business is a second job, and in truth, it is. I suggest you read The Exit Strategy Handbook, by Jerry Mills, Founder and Managing Partner of B2BCFO. By the time you finish you will have a much clearer idea of the magnitude of the challenge you face. It’s available at Amazon.com and at B2BCFO.com.

Get help. A successful business sale requires a team of experts from inside and outside your company and it requires active management of the preparation process. B2BCFO® Partners have the expertise to orchestrate the exit process, identify and build your Success Team™ and work with you and your representative to present the business in a way that will command an optimal price. Many Partners are Certified Business Transition Experts™, specially trained to lead the exit process.

About the Author

Jeff Mann is a Fort Wayne, Indiana based Partner with B2BCFO®. A senior financial executive with 40 years of experience, Jeff helps owners of privately held businesses to achieve their personal and financial goals by bringing “big company” CFO expertise to their businesses. He is a Certified Business Transition Expert® and has been the lead financial executive for several business sales and purchases. He holds a BS in accounting from the University of Virginia and an MBA in finance and marketing from Northwestern University.

NOTICE: B2B CFO Partners, LLC, dba B2B CFO is an Arizona limited liability company that provides advisory and consulting services. B2B CFO® partners are independent contractors and are not officers, employees or agents of, or partners or joint ventures with, the companies they serve, nor are they independent CPAs.